All About Starting An Import Business
With the globalisation of trade and business, we are seeing massive growth in imports and exports in India. The Indian economy is one of the largest economies in the world and one of the fastest-growing ones too.
Economies are driven by consumers. Consumption is what drives production, distribution, and marketing.
Imports have been increasing for the following reasons.
- The demand of consumers is increasing. Hence imports bridge the gap between domestic demand and domestic supply.
- Some imported goods are of better quality than domestic goods. The consumers who can afford them will purchase imported goods.
- In some cases, imported goods are cheaper. It is because the foreign producer has a more efficient and larger production capacity compared to domestic producers.
Production has also increased in India and in fact, Indian goods are also in demand. Hence, more and more goods are being exported to other economies too. These exports generate income and foreign exchange, which further helps our economy grow.
Exports are also on the rise because of the following reasons:
- India is a major producer and manufacturer of many commodities such as agricultural goods, textiles, petrochemicals, pharmaceuticals, iron and steel, automotive and many others.
- With liberalisation, India has gained access to better technology, markets and supply chains. Hence, India can market and export more goods to different markets.
- India has the advantage of cheap labour and raw materials, which reduces the price of goods and services and makes it more competitive.
Keeping these in mind, you can start an import-export business. This business has its own set of challenges which you will need to be aware of before you dive into it.
Familiarise yourself with the rules, regulations and guidelines governing the imports business.
Information on this is scattered in different places.
To simplify the process for potential importers/exporters, we have compiled a step by step guide on starting your import-export business in India. This guide will help you in the following ways:
- Choosing the most effective business model.
- Setting up final documentation
- Following the various compliances and rules.
- Getting the business off the ground by shipping your first order.
- Effectively navigating and growing your business.
The steps are as follows:
Getting your PAN Card
There are various documents which you will need to start your new import/export business. PAN Card is one of them. You and your business partner(s) must have valid identity and address proof to register your business under the registration authority.
Every registered business enterprise must apply for a PAN Card with the Income Tax Department.
The process for applying for PAN for a business entity is quite similar to that of the personal PAN Card.
Choose The Type of Business Entity
Before starting any business, decide the type of business entity you want your company to be. Same goes for import/export business. It can be a sole proprietorship, a partnership firm, an LLP, a Private Limited Company or a Public Limited Company.
You need to choose which type of company you want it to be and get it registered accordingly.
Open a Current Account
Bank Account which is used for business enterprises is called a current account. Your Import/Export business will also need one to transact with the customers, vendors, suppliers and manufacturers.
Documents needed to open the current account will depend upon the type of your business entity.
The IEC Code
The IEC Code or the Import Export Code. It is a unique 10 digit registration code which is issued by the Directorate General of Foreign Trade (DGFT), which is under the Ministry of Commerce and Industries.
The IEC Code is required for anyone who wants to start an Import Export Business in India. Various Documents are needed to be submitted along with the IEC Code application form to obtain the IEC Code. The form has to be submitted to the DGFT.
Choosing your product
Choosing the right product for your business is very crucial. There are various products to choose from. Keep in mind various factors such as the conditions of the international market, regulations and compliances, export/import trends, demand and supply, etc. before you decide on your products.
Registration Cum Membership Certificate (RCMC)
India has several export promotion councils which help in promoting the exports of different goods and services across verticals.
By registering with these councils, exporters gain access to events and assistance for expanding their businesses. Registration is also necessary for getting various benefits under India's foreign trade policy.
The RCMC is necessary for registering with them. It is valid across India and it needs a week to register.
Selecting The Right Market
Ensure that you are targeting the right market for your exports. In case you are an importer, do prior research to check that the products you are importing are in demand in the domestic market.
Points to be kept in mind are the demand for the product, trade barriers, profitability, political environment, regulations, consumer behaviour and so forth.
Based on these factors you may be able to correctly assess the viability of the products and choose the market accordingly.
After finding the market for your products, you will need to find the buyers for them. There are several ways through which you can find potential buyers for your products.
You can collect leads from your website, register on buyers - sellers platforms, participate in Trade Fairs and Exhibitions, use government bodies like Export Promotion Councils, etc.
The key is to gain access to as many potential buyers as possible.
Get Your Finances In Order
To get your business off the ground, you will need to get your finances in place. Even if you have formulated a great plan or have prepared many contingencies, your business will not succeed if you don't have good initial financing.
You need to figure out which type of financing is best for you. You can take short-term or long-term financing depending on your business requirements. In addition, there are also subsidies which you can avail of.
Once you have everything in place, you can now get started. You can now finalise your shipping partner and customs clearing agents, explore market opportunities, and start promoting your business overseas.
If you follow this step-by-step guide, you will be able to navigate the challenges which come with starting an Import - Export Business and finally get the business off the ground.
Q. Is Import - Export Business a good business opportunity?
Ans: Yes, it is a good business opportunity as international trade will only grow. There are several products which have strong demand in India and there are also many markets to explore too.
Q. Is PAN Card important for starting an Import/Export Business?
Ans: Yes, The PAN Card is important if you want to start an import-export business. It is required by the Income Tax Department. You can apply for a Business PAN card, whose procedure is similar to that of the Personal PAN Card.
Q. What is the IEC Code?
Ans: The Import Export Code or the IEC is a unique 10-digit registration code required for all import-export businesses. It is issued by the Directorate General of Foreign Trade (DGFT).
To apply for one, you will need to submit an application form along with the requisite documents with the Director-General of Foreign Trade (DGFT).
After that, you will receive the code and you can go ahead with establishing the import-export business.
Q. How to choose the right market for your goods?
Ans: To choose the right market for your products, you will need to do research. You need to have an idea of the demand, profitability, trade barriers, regulations, supply lines and many other factors before choosing a particular market.
In case you are an importer, you need to be sure that the goods you are importing have a strong domestic demand.
Q. How to get the buyers for your products?
Ans: You can get buyers through various means, such as getting leads from the website or social media, register on the buyer - sellers platforms, participate in Trade fairs and exhibitions, etc.